On July 1, 20X1, Amos Corporation granted nontransferable, nonqualified stock options to certain key employees as additional compensation. The options permit the purchase of 20,000 shares of Amos’s $1 par common stock at a price of $32 per share. On the grant date, the stock’s market value was $32 per share. The options were exercisable beginning July 1, 20X5, and expire on July 1, 20X9. On February 3, 20X7, when the stock was selling for $53 per share, all options were exercised. Amos's tax rate is 21%. Amos has a December 31 year-end for financial reporting purposes. Required: How much compensation expense should Amos record in 20X1 and 20X2 if the options are worth $15 per share on the grant date? Compute the tax benefit that Amos will receive in 20X7 when the employees exercise the options.
On July 1, 20X1, Amos Corporation granted nontransferable, nonqualified stock options to certain key employees as additional compensation. The options permit the purchase of 20,000 shares of Amos’s $1 par common stock at a price of $32 per share. On the grant date, the stock’s market value was $32 per share. The options were exercisable beginning July 1, 20X5, and expire on July 1, 20X9. On February 3, 20X7, when the stock was selling for $53 per share, all options were exercised. Amos's tax rate is 21%. Amos has a December 31 year-end for financial reporting purposes. Required: How much compensation expense should Amos record in 20X1 and 20X2 if the options are worth $15 per share on the grant date? Compute the tax benefit that Amos will receive in 20X7 when the employees exercise the options.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter15: Contributed Capital
Section: Chapter Questions
Problem 8RE: On January 2, 2019, Brust Corporation grants its new CFO 2,000 restricted share units. Each of the...
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On July 1, 20X1, Amos Corporation granted nontransferable, nonqualified stock options to certain key employees as additional compensation. The options permit the purchase of 20,000 shares of Amos’s $1 par common stock at a price of $32 per share. On the grant date, the stock’s market value was $32 per share. The options were exercisable beginning July 1, 20X5, and expire on July 1, 20X9. On February 3, 20X7, when the stock was selling for $53 per share, all options were exercised. Amos's tax rate is 21%. Amos has a December 31 year-end for financial reporting purposes.
Required:
- How much compensation expense should Amos record in 20X1 and 20X2 if the options are worth $15 per share on the grant date?
- Compute the tax benefit that Amos will receive in 20X7 when the employees exercise the options.
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